Advertising and marketing companies were leading acquirers in the media and telecom industries this quarter, according to PricewaterhouseCooper’s US Media and Telecommunications Deal Insights study released Thursday.

Advertising and marketing firms led deal volumes for the quarter, representing 33% of the overall M&A activity in the media and telecom sectors. Deal volumes in marketing and advertising reached a two-year high, increasing 33% year over year to 244 transactions.

That increase was led by traditional media companies, which are continuing to transform for the digital age by buying technology point solutions, improving back office infrastructure and processes and obtaining better data and analytics, said Bart Spiegel, US media and telecommunications deals partner at PwC.

“Nowadays, there’s increasing effort on investing in analytics,” he said. “There has been and will continue to be significant focus on creating a profile of customers to better reach them in a way that’s not invasive.”

To get closer to consumers, traditional media giants are merging with telecom companies and cable providers. AT&T’s pending $85 billion acquisition of Time Warner is the most recent example of such a tie-up, but before that came Comcast’s acquisition of NBCUniversal and Verizon’s buy-up of AOL and Yahoo.

“Traditional entertainment and media companies appreciate the fact that there’s a changing landscape,” Spiegel said. “Owning that end customer is extremely important. It’s not a new thesis, but we’re seeing it in the numbers and in what companies are investing in.”

PE Strikes Again

As the media, entertainment and telecom sectors converge, private equity firms are eyeing companies in these verticals as lucrative investments.

PE made up 20% of sector deal volume during Q1 of this year. PE also accounted for 55% of announced deal values, with Blackstone’s $17 billion acquisition of Thomson Reuter’s Financial and Risk division the highest of the quarter.

PE companies have cash to burn, and both media companies’ interest in the telecom sector and the opportunity to roll up smaller media and marketing companies and position them for sale are attractive ways to spend it, Spiegel said.

“Over $1 trillion of PE capital needs to be put to work,” he said. “There’s pressure internally for them to generate returns for their investors. They see a lot of potential here.”

M&A Overview

Deals overall in Q1 were smaller than last year. Mega-mergers were down, with just 7% of deals exceeding $1 billion. Transactions less than $100 million represented 62% of the overall pie.

Still, deals over $1 billion contributed to 81% of overall deal value, which was down 53% year over year. Overall deal value is hard to calculate, however, because not all companies make their deal price public, Spiegel said.

Moving forward into Q2, Spiegel expects more deals focused on giving media companies the technology, data and analytics they need to compete in a digital market.

“As companies develop these technologies, [they’re looking for companies with] a proprietary platform, technology or algorithm to identify the end consumer and market more effectively to them,” he said.